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within five business days after receipt of such written demand; (2) the intentional engagingby Employee in misconduct that is materially injurious to the Company; (3) the conviction ofEmployee or a plea of nolo contendere, or the substantial equivalent to either of the foregoing, ofor with respect to, any felony; (4) the commission by Employee of acts of moral turpitude that areinjurious to the Company; (5) a breach by Employee of the Confidentiality and Invention Agreementdated of even date herewith between the Company and Employee; (6) a breach by Employee ofEmployee’s obligations under this Agreement or the Arbitration Agreement (as hereinafter defined);or (7) a breach by Employee of the Company’s Code of Ethics and Code of Conduct, as currently ineffect or as hereafter amended from time-to-time. For purposes of this definition, no act, orfailure to act, on Employee’s part shall be considered “intentional” unless done, or omitted to bedone, by him not in good faith and without reasonable belief that his action or omission was in, ornot opposed to, the best interest of the Company.     Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Causewithout (1) reasonable written notice to Employee, setting forth the reasons for the Company’sintention to terminate for Cause; (2) an opportunity for Employee to be heard before the Board (oran authorized representative thereof); and (3) delivery to Employee of a written notice oftermination from the Board (or its authorized representative) stating that, in the good faithopinion of the Board (or its authorized representative), Employee engaged in the conduct set forthabove in clause (1), (2), (4), (5), (6) or (7) of the preceding paragraph or an event specified inclause (3) of the preceding paragraph has occurred.     D. Change in Control. A “Change in Control” of the Company shall have occurred if anyof the following events shall occur during the term of Employee’s employment:     (1) The Company is merged, consolidated or reorganized into or with another corporationor other legal person, other than an Affiliate, and as a result of such merger,consolidation or reorganization, the Company or its shareholders or Affiliates immediatelybefore such transaction beneficially own, immediately after or as a result of suchtransaction, equity securities of the surviving or acquiring corporation or suchcorporation’s parent corporation possessing less than 51% of the voting power of thesurviving or acquiring person or such person’s parent corporation;     (2) The Company sells all or substantially all of its assets to any other corporationor other legal person, other than an Affiliate, and as a result of such sale, the Company orits shareholders or Affiliates immediately before such transaction beneficially own,immediately after or as a result of such transaction, equity securities of the surviving oracquiring corporation or such corporation’s parent corporation possessing less than 51% ofthe voting power of the surviving or acquiring person or such person’s parent corporation(provided that this provision shall not apply to a registered public offering of securitiesof a subsidiary of the Company, which offering is not part of a transaction otherwise a partof or related to a Change in Control);     (3) Any Acquiring Person has become the beneficial owner (as the term “beneficialowner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under theExchange Act) of securities which, when added to any securities already owned by suchperson, would represent in the aggregate 35% or more of the then
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outstanding securities of the Company which are entitled to vote to elect any class ofdirectors;     (4) If, at any time, the Continuing Directors then serving on the Board cease for anyreason to constitute at least a majority thereof;     (5) Any occurrence that would be required to be reported in response to Item 6(e) ofSchedule 14A of Regulation 14A or any successor rule or regulation promulgated under theExchange Act; or     (6) Such other events that are deemed to cause a Change in Control of the Company, asdetermined by the Board in its sole discretion.     E. Continuing Director. A “Continuing Director” shall mean a director of the Companywho (1) is not an Acquiring Person or an Affiliate or Associate thereof, or a representative of anAcquiring Person or nominated for election by an Acquiring Person, and (2) was either (a) a memberof the Board on the date of this Agreement or (b) subsequently became a director of the Company andwhose initial election or initial nomination for election by the Company’s shareholders wasapproved by a majority of the Continuing Directors then on the Board.     F. Company. The “Company” shall mean Zix Corporation, a Texas corporation, or itssuccessors in interest, as the context requires.     G. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, asamended.2. Termination Without Cause Payment. If the Company terminates Employee’s employmentother than for Cause, the Company shall pay to Employee an amount equal to six (6) months ofEmployee’s base salary, using Employee’s highest monthly base salary during the term of Employee’semployment (the “Termination Without Cause Payment”) pursuant to and in accordance with Section 4.3. Change In Control Payment. If Employee resigns from employment (subject to the noticeand cure provisions set forth below) with the Company and its Affiliates following a Change inControl for a “Change In Control Good Reason,” as such term is defined below, the Company shall payto Employee an amount equal to six (6) months of Employee’s base salary, using Employee’s highestmonthly base salary during the term of Employee’s employment (the “Change In Control Payment”)pursuant to and in accordance with Section 4.     A “Change In Control Good Reason” shall mean (i) a material diminution in Employee’sauthority, duties or responsibilities, (ii) a material diminution in Employee’s base salary, (iii)a material change in the geographic location at which Employee must perform services, (iv) amaterial diminution in the authority, duties, or responsibilities of the supervisor to whomEmployee is required to report, (v) a material diminution in the budget over which Employee retainsauthority, or (vi) any material breach by the Company of this Agreement or any other agreementunder which Employee provides services to the Company or its Affiliates.
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     Notwithstanding the preceding provisions, Employee shall not be permitted to resign employmentfor a Change In Control Good Reason until (a) Employee has provided to the Company notice of theexistence of the Change In Control Good Reason condition within 90 days of its initial existenceand (b) the Company has not remedied the Change In Control Good Reason condition within a period of30 days from the Company’s receipt of such notice. Following the satisfaction of (a) and (b),Employee must exercise his right to resign for a Change in Control Good Reason within 60 days(i.e., such Change in Control Good Reason resignation must occur within 180 days of the occurrenceof the Change In Control Good Reason condition), with the day immediately following the initialexistence of the Change In Control Good Reason condition being day “1”.4. Mode of Payment; Acceptance; No Overlapping Payments. The Termination Without CausePayment or Change In Control Payment, as applicable, shall be paid to Employee in nine (9) equalmonthly cash payments beginning as soon as practicable following his termination of employment butno later than 60 days following such termination, subject to the Company’s receipt within that60-day period of a duly executed release from Employee in a form reasonably satisfactory to theCompany. The Company will provide the form release to Employee within five days of the date of theevent giving rise to the payment. In the event that Employee fails to execute and deliver suchrelease to the Company within such 60-day time period, he shall forfeit the Termination WithoutCause Payment or Change in Control Payment, as applicable. Employee shall be responsible for allapplicable withholdings for taxes and other withholdings required by applicable law and any amountsowed by Employee to Company, and Employee shall pay the same to the Company promptly upon demand ifnot otherwise withheld. The Company’s obligation to make the payments provided for in Sections 2and 3 is absolute, and such payments shall not be mitigated or offset by virtue of Employeeobtaining new employment or failing to seek new employment. Acceptance by Employee of theTermination Without Cause Payment (Section 2) or Change In Control Payment (Section 3), asapplicable, shall constitute a release by Employee of the Company and its Affiliates, shareholders,officers, employees, directors and other agents from all claims arising out of, relating to, or inconnection with, Employee’s employment with, or separation from employment with, the Company andits Affiliates. Employee shall be entitled to receive pursuant to this Agreement only one of thefollowing payments (a) the Termination Without Cause Payment (Section 2), or (b) the Change InControl Payment (Section 3) (i.e., not more than one of any such payments shall ever be payablepursuant to this Agreement).5. Conflict of Interest. Without limiting Employee’s obligations to comply with theCompany’s Code of Conduct and Code of Ethics, Employee agrees that during the term of Employee’semployment, Employee shall not:     A. Engage, either directly or indirectly, in any activity that may involve a conflict ofinterest with the Company or its Affiliates (a “Conflict of Interest”), including ownership in anysupplier, contractor, subcontractor, customer or other entity with which the Company does business(other than as a shareholder of less than one percent (1%) of a publicly-traded or privately-heldclass of equity ownership); and     B. Employee shall not accept any material payment, service, loan, gift, trip, entertainment orother favor from a supplier, contractor, subcontractor, customer or other entity
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with which the Company does business, and Employee shall promptly inform the Chief ExecutiveOfficer as to each offer received by Employee to engage in any such activity.     C. Employee agrees to disclose to the Company any other facts of which Employee becomes awarethat might involve or give rise to a Conflict of Interest or potential Conflict of Interest.6. Restrictive Covenants. Pursuant to the Confidentiality and Invention Agreement executedand delivered contemporaneously with the Company’s and Employee’s execution and delivery of thisAgreement, Employee agrees and acknowledges that the Company’s agreement to provide Employee withconfidential information in exchange for Employee’s agreement to maintain the confidentiality ofits confidential information gives rise to the Company’s interest in restraining Employee fromcompeting against the Company during Employee’s employment and as set forth below, and thatEmployee’s agreement below is designed to enforce Employee’s agreement to maintain theconfidentiality of the Company’s confidential information.     A. Non-Competition; Non-Solicitation of Customers and Employees. Beginning the datethat Employee separates from employment with the Company and through the six (6) month anniversaryof such separation from employment date, Employee shall not:     (1) Directly or indirectly, compete (as defined below) with the Company’s EmailEncryption business or any other material line of business being conducted by the Company(“Other Material Business’), in each case, as the Email Encryption line of business or OtherMaterial Business line of business is comprised and conducted as of the date of Employee’sseparation from employment. For purposes of this Agreement, “compete” shall include,without limitation, engaging, directly or indirectly, in any business, whether asproprietor, partner, joint venturer, employee, agent, officer, director, consultant,advisor, or holder of more than one percent (1%) of any publicly traded or privately heldclass of equity ownership of any business enterprise that is competitive with the Company’sEmail Encryption business or Other Material Business;     (2) Directly or indirectly, on behalf of a competing Email Encryption or Other MaterialBusiness line of business, solicit to do or do business with (i) any person that is acustomer of the Company’s Email Encryption business or Other Material Business as of thedate of Employee’s separation from employment, or (ii) any person that has been a customerof the Company’s Email Encryption business or Other Material Business within the six monthspreceding such date; or     (3) Directly or indirectly, solicit to hire or hire any person that is an employee ofthe Company (including its affiliated companies) as of the date of Employee’s separationfrom employment, or was an employee within the six month period preceding such date, exceptby way of bona-fide general advertising.Although the Company and Employee have, in good faith, used their best efforts to make thecovenants of this Section reasonable in all pertinent respects, and it is not anticipated, nor isit intended, by either party to this Agreement that any arbitrator or court will find it necessaryto reform any of such covenants to make it reasonable in all pertinent respects, the Company and
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Employee understand and agree that if an arbitrator or court determines it necessary to reform anyof such covenants to make it reasonable in all pertinent respects, damages, if any, for a breach ofthe non-competition covenant, as so reformed, shall be deemed to accrue to the Company as and fromthe date of such a breach only and so far as the damages for such breach related to an action thataccrued within the scope of the covenant as so reformed.     B. Restrictions Are Reasonable. Employee has carefully read and considered theprovisions of this Section 6 and, having done so, agrees that the restrictions set forth hereinincluding, but not limited to, the time period of restriction, the geographic areas of restriction,and the scope of the restriction are fair and reasonable, are supported by sufficient and validconsideration, and these restrictions do not impose any greater restraint than is necessary toprotect the goodwill and other legitimate business interests of the Company. Employee acknowledgesthat these restrictions will not prevent Employee from obtaining gainful employment in Employee’soccupation or field of expertise or cause Employee undue hardship and that there are numerous otheremployment and business opportunities available to Employee that are not affected by theserestrictions.     C. Modification of Covenants. It is the desire and intent of each of the parties thatthe provisions of this Section 6 shall be enforced to the fullest extent permissible. Accordingly,if any particular portion of this Section 6 shall be adjudicated to be invalid or unenforceable,this Section 6 shall be deemed amended (i) to reform the particular portion to provide for suchmaximum restrictions as will be valid and enforceable or, if that is not possible, then (ii) todelete therefrom only the portion thus adjudicated to be invalid or unenforceable. This Section 6shall inure to the benefit of any successor to the Company.     D. Notification. Employee agrees that the Company may notify any person or entityemploying Employee or evidencing an intention to employ Employee of the existence and provisions ofthis Agreement.7. Miscellaneous.     A. Pending Litigation Indemnification. During Employee’s employment and followingEmployee’s separation from employment, with respect to any lawsuits currently pending or hereafterasserted against the Company that pertain to (i) matters reasonably within the purview ofEmployee’s job responsibilities while employed with the Company or (ii) matters for which Employeehas particular knowledge, Employee agrees to cooperate reasonably in the defense of the litigationthereof, including signing affidavits and making himself available for interviews, depositionpreparation, deposition, and trial. If Employee is requested to assist with litigation activitiesfollowing Employee’s separation from employment other than those litigation activities in whichEmployee would be required to participate as a named party, the Company agrees to pay allreasonable documented out-of-pocket costs up to a maximum of $1,000 per day incurred in connectionwith such activities and lost income incurred during the period in which Employee assists with suchlitigation activities (not to exceed the lesser of the amount of lost income or $10,000 in any onetax year). Such out-of-pocket reimbursement payments shall be made as soon as practicable afterEmployee provides documentation of such out-of-pocket costs but no later than the end of the taxyear following the tax year in which such expenses were incurred. The amount of expensesreimbursed to Employee pursuant to this Section 7.A. during
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Employee’s tax year shall not impact the amount of such expenses eligible for reimbursementduring any other tax year of Employee. Employee’s right to reimbursement of such expenses shallnot be subject to liquidation or exchange for another benefit. The lost income reimbursement willbe paid in a lump sum within 60 days after Employee provides documentation of the same and suchpayment will be subject to the six month delay applicable to specified employees under section 409Aof the Internal Revenue Code of 1986, as amended (the “Code”). Without the Company’s priorconsent, Employee agrees not to comment publicly on any such litigation or any of the issues in thelitigation. Without the Company’s prior consent, Employee also agrees not to discuss any suchlitigation, or cooperate, with the Company’s opponent(s) in such litigation, their attorneys, ortheir representatives. The Company acknowledges that Employee has certain rights toindemnification as an officer of the Company as set forth in the Company’s Restated Bylaws.     B. Waiver. No waiver of any provision of this Agreement shall be deemed, or shallconstitute, a waiver of any other provision, whether or not similar, nor shall any waiverconstitute a waiver of any continuing or succeeding breach of such provision, a waiver of theprovision itself, or a waiver of any right under this Agreement. No waiver shall be binding unlessexecuted in writing by the party making the waiver.     C. Limitation of Rights. Nothing in this Agreement, except as specifically stated inthis Agreement, is intended to confer any rights or remedies under or by reason of this Agreementon any persons other than the parties to it and their respective permitted successors and assignsand other legal representatives.     D. Remedies. Employee hereby agrees that a violation of the provisions of Section 5,Section 6, or Section 7.A. would cause irreparable injury to the Company for which it would have noadequate remedy at law. Accordingly, in the event of any such violation, the Company shall beentitled to preliminary and other injunctive relief without the necessity to post a bond or othersecurity. Any such injunctive relief shall be in addition to any other remedies to which theCompany may be entitled at law or in equity, or otherwise.     E. Notice. Any consent, notice, demand, or other communication regarding any paymentrequired or permitted hereby must be in writing to be effective and shall be deemed to have beenreceived on the date delivered, if delivered in person, or the date received, if deliveredotherwise (including by U.S. mail, overnight delivery or e-mail), addressed to the applicable partyat the address for such party set forth below or at such other address as such party may designateby like notice:The Company:Zix Corporation